Game theory, and how businesses use games

What is game theory, and how do businesses use games?

In your Managerial Economics textbook, we consider a sequential-move game in which an entrant is considering entering an industry in competition with an incumbent firm (see Figure 15-1). There are several possibilities of how this sequential game will be played. We want to use the Froeb rule of look ahead and reason back.

For your discussion post, use Figure 15-1 from the textbook as your starting point to address the following:

Can, and how does, the entrant succeed?
Is the incumbent ever in control of this game?
You may wish to review the old game known as Duopoly, as well as Antoine-Augustin Cournot, to help inform your post.

Sample Solution